Liontrust GF European Strategic Equity Fund

July 2019 review

The Fund’s A4 share class returned -1.6%* in euro terms in July (A3 share class -1.5%), compared with the 0.3% return from the MSCI Europe Index and 0.8% return from the HFRX Equity Hedge EUR Index.

 

Net exposure at the end of July was c.77%. The Fund’s returns were dented by underwhelming performances by both the long and short book. The long book’s return fell short of the market, while takeover news for one holding contributed to the short book’s underperformance.

 

Central banks continued to be at the forefront of market moves. The Federal Reserve promised in June to act as appropriate to sustain the US economic expansion and in July the policy-setting committee deemed that a 25 basis point cut was necessary. This move – the Bank’s first interest rate cut in over a decade – was entirely priced in by markets though there was some outside hopes for a 50 basis point cut.

 

Some investors were therefore disappointed to hear that the July cut was a “mid-cycle adjustment to policy” rather than the start to another series of rate reductions. According to futures markets, three further rate cuts were priced in for in the next 12 months.

 

There are now also expectations that the European Central Bank (ECB) will lower rates. The Bank adjusted the wording in its July policy statement to declare that rates will remain at present or lower levels at least through the first half of 2020. ECB President Mario Draghi added in his press conference that there is greater expectations for lower inflation and the Governing Council discussed a range of stimulus options including rate cuts.

 

Defensive sectors came out on top in the MSCI Europe Index in July. Consumer staples (+2.9%) was the top performer, followed by utilities (+1.6%) and health care (+1.5%).

 

Materials (-2.8%) was the weakest sector and presented a headwind for the long book’s returns due to its overweight position. Global mining groups Rio Tinto (-5.5%) and Anglo American (-10.8%) were among the fallers. Anglo American released interim results which showed underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) rose 19% in the first half of 2019, while revenue increased 8%. The improvement in underlying EBITDA margins to 46% from 41% was due to strong prices for iron ore and platinum group metals. Anglo unveiled a larger than expected share buyback of US$1bn in addition to its improved dividend of US$0.62. However, the group’s share price declined after a major shareholder chose to unwind his investment.

 

International Personal Finance (-17.0%) continued its recent share price decline following the Polish government’s proposal in June to lower the existing cap on non-interest loan costs. In July, the home credit company’s interim results showed a slight drop in interim pre-tax profit, though revenue increased 7%. Its Mexico business saw pre-tax profit halve, with lower-than-expected agent collections and a softening macroeconomic backdrop taking a toll.

 

Italian pharmaceutical group Recordati (+10.6%) and French market research company Ipsos (+10.8%) were among the positive performers in the long book after both issued interim results. The former saw a 6.8% increase in consolidated revenue and a 7.4% rise in EBITDA. The group also highlighted the acquisition of rights to two new treatments: Signifor and Signifor LAR, which are anticipated to generate annual sales of over US$200m. New full year guidance was issued with sales indicated to range from €1.46bn-€1.48bn and EBITDA between €535m and €545m.

 

Ipsos saw revenue grow 15% in the first six months of 2019, though the highlight was organic growth of 3%, which was strongest in the Asia-Pacific and Americas regions. The company stated that it expects organic growth for the full year to be between 2% and 4%.

 

Within the short book, one of the detractors was a UK queuing and ticketing technology, which announced that it has put itself up for sale after receiving some interest regarding a takeover. The company’s shares have seen a significant decline over the last 12 months as it stated that it would require greater investment to integrate its technology. Meanwhile, a Belgian biotechnology company’s shares jumped after it received a significant investment from a larger US peer.

 

Performance since launch* (%)

LESEF July 2019 Performance

 

Discrete monthly returns (A4 share class)*

1yr since 25/04/14
Fund -1.1% 24.6%
MSCI Europe 1.6% 33.1%
2019
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 7.6% 1.3% 3.0% -1.6% -3.1% 3.1% -1.6%
MSCI Europe 6.2% 4.2% 2.0% 3.8% -4.9% 4.4% 0.3%
2018
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 0.7% 1.1% -1.7% 1.5% 1.2% -2.6% 2.0% -2.0% 1.8% -4.2% -6.3% 1.5%
MSCI Europe 1.6% -3.9% -2.0% 4.6% 0.1% -0.7% 3.1% -2.3% 0.5% -5.3% -0.9% -5.5%
2017
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 1.5% 2.0% 0.5% 1.4% -2.1% -2.0% -0.2% 1.6% 0.8% 1.1% -3.3% 3.0%
MSCI Europe -0.4% 2.9% 3.3% 1.7% 1.5% -2.5% -0.4% -0.8% 3.9% 2.0% -2.1% 0.8%
2016
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund -0.6% -0.2% -0.8% -0.7% 0.9% 2.3% 1.1% -1.5% 2.7% 2.7% -2.2% 1.2%
MSCI Europe -6.2% -2.2% 1.3% 1.9% 2.3% -4.3% 3.5% 0.7% 0.0% -0.8% 1.1% 5.8%
2015
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Fund 1.7% 2.4% 1.5% -1.6% 1.3% -1.3% 3.9% -1.6% 2.2% -3.4% 0.8% 0.2%
MSCI Europe 7.2% 6.9% 1.7% 0.0% 1.4% -4.6% 4.0% -8.4% -4.3% 8.3% 2.7% -5.3%
2014 (subsequent to April's change to fund name and objective)
May Jun Jul Aug Sep Oct Nov Dec
Fund 0.2% 0.0% 1.2% -0.2% -0.5% 1.9% 2.4% 0.9%
MSCI Europe 2.5% -0.4% -1.5% 2.0% 0.4% -1.8% 3.2% -1.4%


Discrete years' performance** (%)
, to previous quarter-end:

 

 

Jun-19

Jun-18

Jun-17

Jun-16

Jun-15

Liontrust GF European Strategic
Equity A4 Acc EUR

2.5

3.0

5.3

2.9

10.1

 

*Source: Financial Express, as at 31.07.2019, total return (income reinvested and net of fees). Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 03.07.2019, total return (income reinvested and net of fees).


For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in Funds managed by the Cashflow Solution team involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Liontrust European Growth Fund holds a concentrated portfolio of stocks, if the price of one of these stocks should move significantly, this may have a notable effect on the value of the respective portfolio. The Liontrust Global Income Fund's expenses are charged to capital. This has the effect of increasing dividends while constraining capital appreciation. 

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Monday, August 12, 2019, 6:49 PM